This is an interesting development for the North African region;
Major international oil companies say they plan to step up their investments in Egypt, expecting to find more oil and gas now that ENI’s giant Zohr gas discovery has put its Mediterranean waters on the map.
A good few years ago I worked briefly on proposals for an LNG facility in Egypt which is now running (www.egyptianlng.com) but that was some while ago. Since then there hasn’t been much mention of Egypt on the international oil and gas market until now – as this article outlines.
Once a net gas exporter, Egypt has turned into a major importer in recent years as growing domestic demand outstripped production, but the discovery of the 850 billion-cubic metre Zohr field in 2015 is expected to change that.
The development goes further than reducing Egypt’s cost of importing gas and provides the potential for the Country to become a major player in the international gas markets of the future – refer to my last blog post as to why this is important for Europe – which is a good thing for North Africa as a whole.
News from Downstream Today (and reported elsewhere too), that Shell’s plans to expand its LNG business could be scuppered by the latest western sanctions planned against Russia.
Shell have, for some time, had a tie-up with Russian Gas Major Gazprom, which includes operating the large LNG facility Sakhalin-2 in the Pacific. But
On Friday the U.S. government said it was restricting exports, re-exports and transfers of technology and equipment to the Yuzhno-Kirinskoye field. Shell, with considerable assets in the United States, would face consequences if it went against the sanction, as would other potential foreign investors.
The intention of these new sanctions is to target future projects rather than tackle current supplies that might cause prices to rise.
Last year, Washington slapped sanctions on an Arctic project that state-owned Russian oil major Rosneft planned to develop with U.S. oil major ExxonMobil, effectively forcing the two companies to suspend drilling despite the discovery of oil.
It’s a dangerous game to play, while restricting exploration clearly hurts Russian exports it is also damaging to western oil companies who have to keep replenishing their reserves of oil and gas to keep shareholders happy and provide ongoing work for their staff – and Engineering contractors too.
Development in African countries continues apace and Tanzania is one country that has the potential to be an LNG power house, possibly rivalling Nigeria, as it has massive off-shore gas reserves to potentially exploit.
As often happens with these things, it seems that vanity and politics (two things never too far apart) are leading to an illogical decision about the location of the new mega-port which may hinder rather than help the development of natural resources that will enable the Country (and the region) to expand and prosper.
Of course, the other great hindrance to the development of African Countries (and other poorer nations around the World) is the UN drive to limit fossil fuel burning in the mistaken and misguided aim of reducing Global Warming. It is perverse in the extreme that having got rich off the back of exploiting oil and gas reserves (some of it take from these poorer nations) that the West now seeks to limit the extent to which these poorer nations can do the same. Instead, offering to hand them up to $100bn per year – yes, this is correct – through its Green Climate Fund, to help them develop other means of energy creation. One report stated somewhat euphemistically;
“But Africa’s capacity to use the funds once they have become available remains one of the central issues, with many fearing countries lack the necessary frameworks to make sure the money is used for its intended purpose.”
This is a prime example of how the West, the UN, the EU and all the others are failing Africa.
The LNG industry is an interesting one. The ability to take methane out of the ground, chill it to -162°C so that it liquefies at atmospheric pressure, then pump it on to a ship and sail that ship to wherever the gas needed is an incredible feat of engineering.
The liquefied gas is then stored in vast tanks the size of Wembley stadium and re-vaporised on demand to provide natural gas for power stations and other facilities.
LNG contracts are often locked in for 20+ years as the upfront investment in a new facility is massive. “Take or Pay” contracts are common too – where a buyer HAS to take the LNG (even if they don’t want or need it) or pay a proportion of the price anyway. The supplier will then sell the cargo on the spot market.
Early plants sprung up in the north Africa the Middle East and Far East. I visited the MLNG-Dua site at Bintulu in Malaysia, back in the late 90s to do some trouble shooting, but these days Australia is fast becoming the market leader.
The latest innovation that is about to hit the water is FLNG – a Floating LNG production and storage facility. FPSOs (Floating production, storage and offloading) facilities for crude oil have been commonly used for decades, and enable remote fields to be accessed relatively cheaply but doing the same for natural gas has always been more of a challenge.